Civil Justice

The U.S. Chamber, primarily through its affiliate the Institute for Legal Reform (ILR), pushes to restrict consumers’ and workers’ right to seek compensation in court when harmed by corporate wrongdoing.

Consumers, workers, and small businesses typically rely on the assistance of an attorney to help them seek compensation in civil court for injuries caused by corporate wrongdoing. However, in the late 1990s, the U.S. Chamber of Commerce launched a well-financed campaign to malign plaintiffs’ attorneys as part of a wider crusade to implement national and international policies that shield corporations from lawsuits. This campaign continues today.

In 1998, the Chamber founded the Institute for Legal Reform (ILR), now the largest sub-group within the Chamber. Nearly half of the $44.8 million the ILR raised in 2014 came from just 20 large donors, with an average donation of more than $1,000,000. The ILR’s primary mission is to lobby to make it harder to for consumers, workers, and small businesses to go to court to hold corporations accountable for wrongdoing.

One of the ILR’s main goals is to further entrench the use of pre-dispute forced arbitration clauses in corporate contracts with consumers, employees, and small businesses. These “rip-off clauses” are often buried in the fine print of credit card, bank account, cable television, cell phone, internet, car loan, and student loan contracts. They deny individuals’ right to their day in court and require them instead to resolve disputes in private arbitration proceedings, where the arbitrators are chosen by the corporations and their decisions remain secret and aren’t subject to appeal.

While the ILR produces “research” that suggests that consumers are better served in arbitration than in the courts, more credible research shows that consumers and employees are less successful in arbitration. The Consumer Financial Protection Bureau (CFPB) has found that arbitration clauses are prevalent in financial services contracts and that very few consumers use arbitration to resolve financial disputes.

Arbitration clauses in consumer contracts also frequently forbid consumers from participating in class actions against companies. As a result, consumer disputes with companies can be arbitrated only on an individual basis, a method that is impractical because the individual amount at stake is often small, even where the corporation’s total benefit from the challenged conduct is significant. For example, a bank may levy an entirely unwarranted $50 fee against 5 million account holders. Corporations know that few customers will expend the time and money to litigate a $50 fee. But this same $50 dollar fee represents $250 million in revenue across 5 million customers. A class action allows people who have suffered similar injuries to band together and sue in one case, dramatically reducing the collective amount of time and money they would have spent litigating their cases separately.

The growing prevalence of forced arbitration clauses containing class action bans means that consumers are increasingly unable to challenge wrongful corporate conduct. And if consumers can’t seek redress, companies do not have to answer for predatory or illegal practices. In short, by advocating for forced arbitration and class action bans, the Chamber is seeking to establish a form of corporate impunity. A “Get Out of Jail Free” card, if you will.

The Chamber doesn’t just lobby to protect and strengthen the ability of corporations to enforce forced arbitration clauses and class action bans. It also litigates to this effect. A recent study of the Chamber’s legal activity found that access to the courts was the most commonly litigated issue by the Chamber, with the Chamber consistently supporting corporate efforts to restrict consumer and small business plaintiffs’ access to the courts via forced arbitration clauses and class action bans.

The Chamber also spends big during state judicial elections in support of judicial candidates whose views on civil justice issues are aligned with its own push to limit consumers’ access to courts and against those candidates who hold opposing views. Outside groups spent almost $20 million in state judicial races during 2016 and the Chamber was a major player.

In North Carolina, the Chamber funded ad campaigns in an unsuccessful effort to preserve a Republican majority on the Supreme Court. In a Montana Supreme Court race, the Chamber helped to finance an aggressively negative ad against Dirk Sandefur, depicting the judge as soft on crime, in an attempt to elect his more Chamber-friendly challenger. Examples of the Chamber’s involvement in judicial elections exist for other election cycles as well. In 2011, the Chamber spent more than a million dollars in Wisconsin to reelect Supreme Court Justice David Prosser, Jr. on the assumption that he would rule against legal challenges to anti-worker legislation.

Because of relatively poor state rules governing political spending disclosure, it is extremely difficult to know which groups are spending money in state races, including in judicial elections. The Center for Public Integrity notes, “Tracking all outside spending is nearly impossible thanks to lax state disclosure rules, as well as a loophole in the federal tax code that allows politically active nonprofits to run attack ads without disclosing who funds them.” Sometimes, groups will funnel money to yet other groups in order to conceal their involvement in a race. For example, Mississippi Supreme Court Justice Oliver Diaz suspected that the Chamber was using just this strategy, saying, “The ads that the U.S. Chamber ran against me in 2000 were extremely similar [to the ones] that the Law Enforcement Alliance of America ran against me in 2008.” The Chamber had run highly negative ads, including accusing Justice Diaz of “voting for drug dealers and baby killers.”

In a 2002 speech to the Illinois Chamber of Commerce, U.S. Chamber President Tom Donohue gave some insight into the rise of the Chamber’s involvement in judicial elections. Taking aim at trial lawyers who successfully litigated class action lawsuits for people harmed by asbestos and tobacco companies, he said, “Our approach is simple — implement a multi-front strategy of challenging these unscrupulous trial lawyers every time they poke their head out of the ground. … On the political front, we’re going to get involved in key state Supreme Court and attorney general races as part of our effort to elect pro-legal reform judicial candidates…. We’re clearly engaged in hand-to-hand combat, and we’ve got to step it up if we’re going to survive.”

The Chamber and ILR love to talk about “tort reform,” but in reality, these reforms would benefit giant corporations at the expense of consumers, workers, and small businesses:

The top two and four of the top six bills the Chamber lobbied for in 2017 (as of September) are in the field of civil justice.

Its most lobbied bill, The Fairness in Class Action Litigation Act, would drastically limit the ability of consumers and small businesses to seek redress through class action lawsuits. This legislation would require every consumer joining a class action lawsuit to have suffered the same level of injury before the suit could proceed.

When the Consumer Financial Protection Bureau recently banned financial companies from including forced arbitration clauses in contracts when they block consumers from joining a class action, the Chamber denounced the rule and argued that the CFPB had “gone rogue”. In fact, the CFPB, created to protect consumers from predatory companies, was doing just that in enabling consumers to sue financial institutions for unfair practices.

The Chamber opposes an Obama-era rule that bans the use of forced arbitration clauses in contracts with colleges. When for-profit Corinthian Colleges was accused of defrauding students, the Chamber filed an amicus brief in support of Corinthian to prevent students from suing.

Another Obama administration rule, banning forced arbitration clauses in nursing home contracts, was opposed by the Chamber.

Despite a steady stream of corporate scandals (Wells Fargo, VW, GM, Toyota, Takata, Equifax, etc.) the Chamber argues that corporations are subject to “coercive and ‘pile-on’ over enforcement” regarding legal violations and has published a report listing incidents of this supposed abuse. To rectify the situation, the Chamber has suggested reforms such as weakening the False Claims Act, a law created to prevent companies from defrauding the government. These reforms would ultimately reduce corporate accountability.

The American public deserves a legal system that gives individuals a fair opportunity to seek just compensation for harm suffered at the hands of wrongdoers, including the U.S. Chamber’s corporate membership.